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Sebi tells Linde: No room for word games in related party norms definition
The Securities and Exchange Board of India (Sebi) has asserted there is no legal distinction between 'related party transaction' and 'transaction with a related party' under LODR.
According to Sebi's submission, both expressions are 'used interchangeably' and should be treated as synonymous for compliance and enforcement. Business Standard has seen the copy of Sebi's response to SAT dated July 11.
Sebi's views assume significance as the long-drawn battle over Linde India's RPTs and their valuation exercise draws to a possible close with the SAT reserving the order in the matter.
Both Sebi and public shareholders have accused Linde India of indulging in word play to classify transactions with its arm Praxair India as 'non-material' to escape shareholder scrutiny.
Emails sent to Sebi and Linde were not answered.
RPTs are deemed to be material if their value during a financial year exceeds 10 per cent of the company's turnover in the previous financial year.
Linde India says that only transactions executed under a 'common contract' should be considered while determining this 10 per cent threshold.
Sebi had earlier underscored that market standards require aggregating all RPTs with a particular related party, irrespective of contract structure or grouping
In its latest submission, Sebi directly counters Linde India's claim that 'related party transaction' and 'transaction with a related party' have distinct meanings in the regulations.
The market regulator has argued that accepting Linde's view would lead to 'anomalies and absurdities', potentially undermining the intent behind disclosure thresholds and materiality requirements.
Sebi notes that the provision to Regulation 23(1), which uses the phrase 'transaction with a related party,' is meant to clarify when such transactions cross materiality thresholds, not to introduce a separate definition.
Among Linde India's top public shareholders are domestic mutual funds, which hold 6.17 per cent, and individual investors, who own over 12 per cent. Linde India's promoter, BOC Group of UK, holds a 75 per cent stake in the company. In 2018, the promoter had attempted to take Linde India private, but the delisting bid failed.
Experts said the SAT judgement will be closely watched by industry stakeholders as it could set important precedents for defining and disclosing related party transactions — a crucial element of corporate governance and transparency for publicly listed companies.
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